If you had been a Wall Street analyst this year and predicted that almost any bank's earnings would rise and its stock go up, chances are you would have been right.

But Joel W. Silverstein of Deutsche Morgan Grenfell Inc. has managed to navigate the waves of the rousing 1996 bull market with more precision than almost anyone else.

He was named the best forecaster of money-center results in the American Banker's annual survey of earnings estimates by sell-side bank equity analysts. Data were provided by First Call Corp.

The money-center banks are a particularly competitive arena for analysts, since they are followed by many Wall Street firms. Most of these banks are covered by 20 or more analysts.

A healthy dose of skepticism is a valuable tool when preparing earnings forecasts in an industry as seemingly vibrant as banking is now, Mr. Silverstein said from his no-frills office in midtown Manhattan.

"I tend to pay particular attention when the banks are up," he said, referring to the industry's performance. "You don't want to get caught in a downward spiral."

Most analysts make earnings estimates by using their own formulas to season the banks' data. Like many others right now, Mr. Silverstein said he usually adds a dash of credit deterioration to the mix because credit "is now about as squeaky clean as it can get."

Still, the analyst is not so cautious that he can't recommend many stocks among the money-center and superregional banking companies that he covers.

He currently has "buy" ratings on Citicorp, Chase Manhattan Corp., Banc One Corp., Fleet Financial Group Inc., First Bank System Inc., and Wells Fargo & Co.

Mr. Silverstein said he doubts that banks next year can repeat their eye-popping 1996 gains. He thinks investors will have to be much more selective about which stocks they buy in 1997 if they want to outperform the overall market.

"You can't assume a major, groupwide revaluation like we had this year," he said.

Then again, he readily acknowledged that he hadn't imagined bank stocks would do nearly as well this year as they have.

"At the start, I was hoping 1996 would be half as good a year as 1995," said Mr. Silverstein. "I was happy to be wrong."

He expects continued modest economic growth and low inflation next year, a good environment for banks. Stock repurchase programs will continue to support earnings per share.

But as ever, he pointed out, banks are highly susceptible to economic downturns. The full effects of the recent wave of consumer bankruptcies won't be known until next year, he said. In the meantime, he expects "no dramatic decline" in chargeoffs.

The strongest performers in 1997, he said, will be those that continue to develop distinctive market niches that can weather changes in the economy. In addition to the banks he already recommends, he sees strong growth potential for Bank of New York Co. because of its increasingly profitable securities processing activities, although he currently rates the stock a "hold."

He said he sees a bit dimmer prospect for KeyCorp, the Cleveland-based superregional. Although Wall Street has almost unanimously approved the bank's new business strategy, Mr. Silverstein has downgraded it to "accumulate" from "buy" since its Nov. 22 announcement.

He sees KeyCorp as now a less attractive takeover target, and he said he doubts the stock will be able to advance much beyond its current price without a boost from takeover speculation. "It looks to me like they've squeezed out some of the juice," he said.

Mr. Silverstein, who is married and the father of four, has been following banks for Deutsche Morgan Grenfell since July 1994. Before joining it, he had covered banks for Nomura Securities International Inc.

And before becoming an analyst, Mr. Silverstein spent four years in the vineyards of banking itself. He worked for Chase Manhattan's financial institutions group and in the capital markets division of Chemical Bank.

To keep fit, and as a diversion from his analytic chores, he's also an enthusiastic basketball player in Wall Street's amateur leagues. Indeed, he's constantly on the lookout for a 6-foot, 10-inch player to flesh out his vertically challenged team.

As for himself, "I have a problem with my knees," he admits. "They're too close to the floor."

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